Choosing to get a credit card can be an exciting decision in your life. However, it can also can be a frustrating and complex one. For years people with limited to no knowledge on credit cards have enrolled in offers which they find appealing. Yet if you are not careful you can rack up a good amount of debt if you dont manage your credit card properly. The bottom line is that you can’t venture into obtaining a credit without having some fundamental knowledge of how they work and what respective benefits or downfalls their features.
Interest rates have always been, and will always likely be, the predominant factor in consumers’ decisions to obtain one credit card over another. A specific card’s interest charge is reflected in its APR. APR, an abbreviation for annual percentage rate, is the interest rate a card holder must pay if he/she chooses not to pay their outstanding monthly balance in full. APR is represented as a yearly interest rate, thus card holders may divide it by twelve to get a rough idea of what their monthly interest charge will be. It’s important that prospective card holders note that a credit card can have various APRs. They will have a specific one for outstanding balances and possibility different ones for cash advances or balance transfers.
A cheap credit card that has a low APR for outstanding balances, cash advances, and balance transfers is best for both long and short-term borrowers. APR owed on purchases is almost always less than that paid on cash advances or balance transfers. Long-term borrowers may be specifically interested in obtaining a card with a low balance transfer APR. If they happen to be presented with a credit card offer that features lower interest rates than those they already have, and decide to transfer the balance of their existing card to the new one, they’ll piggyback less expense by having a low balance transfer APR. Further, they should also be interested in the outstanding balance APR if they don’t intend to make all their monthly payments in full. Short-term borrowers who fully intend to make their outstanding payments in the proper time period shouldn’t be too concerned with APR, as they won’t be facing interest charges. All borrowers should be warned to avoid variable APRs. These types of interest charges can fluctuate depending on a variety of factors. Many card holders have unknowingly fallen victim to variable APRs, thus exercise caution and choose a card that offers a fixed-rate APR. Some credit companies also trap unknowing consumers by offering a promotional APR. Once, the promotional period is over, many cardholders get dinged for negligent spending. Again, exercise caution in spotting these tactics.
All prospective card holders should remember that APR is NOT the full amount they are paying to use credit. The actual charge is known as the finance charge, and is computed using the APR as well as the respective cardholder’s outstanding balances. How specific credit companies calculate outstanding balances can vary, thus it’s important to talk to your specific credit company. Borrowers who continually pay their outstanding balance need not worry about finance charges.
Most of us know that credit cards come bundled with various fees. Among these fees are late fees, over-limit fees, balance transfer fees, etc.. However, not all cardholders need to be wary of these fees. Charges stemming from late and over-limit fees tend to be of overwhelming interest to long-term borrowers. Since these individuals intend on constantly utilizing their credit cards over a long period of time, they’re bound to make a late payment here and there or surpass their credit limit. Various credit cards impose penalties of varying amounts for such actions. Check and double check these fees before enrolling for a certain card. Long-term borrowers should also be eyeing balance transfer fees. Although the above fees might be of less importance to short-term borrowers, they should still be acknowledged and avoided. The one fee that should interest both groups on an equal level is the annual fee. This is a per annum payment card holders make to retain their credit cards.
Finally, a specific consumer may benefit from a rewards credit card. Rewards credit cards, as their name implies, reward consumers for the expenditures they make. How specific companies calculate the rewards a particular person is entitled to vary, however, many use a point system in which a person is rewarded a certain number of points for each dollar they spend. They can redeem these points for anything from airline miles to free vacations at a specified time period. Incentivized credit cards will undoubtedly benefit more long-term borrowers who are constantly using their credit cards. One needs to rack up a good number of charges before their entitled to some sort of reward, thus this card is much more fitting for avid borrowers.
As someone new to the world of “plastic” it can be difficult to orient yourself and find the card that fits you best. Fortunately, by using some of the advice mentioned above, your tread into the credit card world can be made all the more pleasurable. If one exercises caution while selecting a card (in regards to reading all the fine print) and makes every additional effort to ensure the card is conducive to their spending habits, they’ll learn to enjoy the convenience allotted by credit cards. Otherwise, they may open themselves up to serious consequences.
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